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3 Factors That Will Determine the Damage From Association Health Plans

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With federal rule changes for association health plans (AHPs) starting to phase in this fall, a big question is how much the plans will hurt the traditional state insurance markets for individuals and small businesses. AHPs are plans that trade and professional organizations can offer to their members and that, under the new rules, can provide fewer consumer cost and coverage protections to individuals and small businesses than previously allowed — attracting healthier consumers and leaving behind sicker and costlier risk pools in the individual and small-group insurance markets. How much damage the plans will cause will depend on at least three factors:

How much will AHPs proliferate?

The new rules will likely prompt an AHP expansion, at least in some states, because they make it far easier for an AHP to be considered a large employer plan, which can provide fewer consumer cost and coverage protections than plans in the individual or small-group markets. The rules let an association offer an AHP, and be treated as a large employer, if its members are either in the same industry or profession or are located in the same state or metropolitan area, including an area that crosses state lines. Or, an association can form for the purpose of offering an AHP, as long as it has one other “substantial business purpose,” such as convening conferences and providing educational materials to members. In addition, the rules open AHPs to individual “working owners” – self-employed people who might otherwise enroll in individual-market plans. The more people and small groups that enroll in AHPs, the more the new plans will affect regular insurance markets.

Some groups have already decided to offer the plans. The Las Vegas Metro Chamber of Commerce said it would start an AHP for small businesses and self-employed people in Nevada by September 1. The National Restaurant Association announced a new AHP that will offer 120 different plan designs to restaurants, hotels, country clubs, and lodging companies with two to 99 employees. Several other groups are considering offering AHPs, including the Nebraska and Illinois Farm Bureaus and the Chamber of Commerce of Greater Montgomery County, Pennsylvania. Another group to watch: the Job Creators Network, a business group that employs former Health and Human Services Secretary Tom Price (a vocal AHP booster) as a senior fellow for health care.

At the same time, some large organizations that have lobbied for decades to expand AHPs say they won’t likely offer plans under the new rules, Politico reported. The National Federation of Independent Business, for example, said the rules don’t let the group create a nationwide AHP that could cross state lines without meeting varying state insurance rules and consumer protections.

How aggressively will AHPs try to avoid sicker enrollees?

AHPs that form under the new rules generally can’t deny coverage or set premiums based on health factors, including a person's pre-existing medical conditions or health status. But they still have ways to deter people (or small firms) with serious health needs from enrolling.

First, they can exclude or sharply limit coverage for the Affordable Care Act’s (ACA) essential health benefits, such as mental health care or substance-use disorder treatment. A plan that doesn’t cover such services — which can have high costs — won’t attract enrollees who need them. Second, the plans can charge higher premiums based on non-health factors that correlate strongly with health risk, such as gender or occupation, and can charger older self-employed people or small groups far more compared to younger people and small groups than is permitted in the individual and small-group markets. For example, a small roofing business could be charged more for the same AHP than an accounting office. Likewise, a business consisting mainly of women in their 40s and 50s would likely pay far more than a small group of men in their 30s. In addition, the rule clarified that AHPs, like other employer plans, can set up wellness programs that vary people’s premiums in ways that could serve as a backdoor route to health status discrimination – for example, by reducing premiums for people who meet body-mass or blood pressure targets.

What will states do to protect consumers?

Some states are concerned about AHPs, which have a history of fraud and abuse. The new rules affirmed that states have “broad authority” to regulate AHPs and even called on state regulators to prevent and respond to potential problems. And some states are already taking action. Vermont, where no AHPs now operate, announced it would file emergency regulations to “protect Vermont consumers and promote the stability” of the state’s insurance markets. Twelve states, led by New York and Massachusetts, have sued the Trump Administration over the rule changes out of concern about fraud, mismanagement, and the undermining of consumer protections. States could also consider standards (such as for benefit design and premium rating) that would help level the playing field between AHPs and insurance plans in the individual and small-group markets, thereby counteracting potentially significant shifts to AHPs.